Nvidia options traders bank on longer-term stock recovery
FILE PHOTO: Nvidia logo and decreasing stock graph are seen in this illustration taken, January 27, 2025. REUTERS/Dado Ruvic/Illustration/File Photo
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NEW YORK, Nov 12 : Options traders cashed in parts of their bets against Nvidia and positioned for a longer-term share price recovery on Thursday, after CEO Jensen Huang announced he was stepping down.
Huang’s departure has raised uncertainty over the future direction of the AI chipmaker he built into one of the world’s most valuable companies. Chief Financial Officer Colette Kress will serve as interim CEO as the company searches for a permanent successor.
The leadership turmoil sent options volatility soaring on Thursday, but options trading suggested that investors were repositioning for a recovery rather than fleeing the stock.
“Nvida’s competitive advantage and customers don’t disappear overnight,” said Seth Hickle, chief investment officer at Mindset Wealth Management. “The market is trying to determine whether this is a temporary leadership crisis or something that fundamentally changes the AI investment thesis.”
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Options give holders the right, but not the obligation, to buy or sell the underlying stock at a set price before a certain date. Call options typically gain value when the stock rises, while puts gain when it falls.
Several large options trades showed investors rolling bullish positions further into 2027, lowering upside targets and taking profits on downside hedges rather than abandoning exposure to the company altogether, data from Chris Murphy, co-head of derivatives strategy at Susquehanna, showed.
In one trade, an investor sold put options and bought cheaper ones, collecting about $18.9 million while keeping some protection against a further drop, Murphy said.
Another investor paid about $18.8 million for call spreads, a bet that pays off fully if Nvidia climbs about 16 per cent from current levels by March.
Other trades pushed bullish positions out by three months and lowered the price targets, adding time for a recovery to play out.
Investors also bought about 50,000 January call options, spending an estimated $45.3 million to $55 million to bet the shares will rise above current levels by expiry.
Nvidia’s shares were last down 4.84 per cent at $165.40. Nvidia’s 90-day implied volatility has climbed to about 52 per cent from roughly 33 per cent a month ago, reflecting growing uncertainty ahead of the company’s earnings report next week, according to Susquehanna data.
“Implied (volatility) will remain high until the earnings report, and subsequently the conference call as it can shed some clarity about how Nvidia plans to move forward past this boondoggle,” Hickle said.
Source: Reuters
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